While we invest in many things in our lives—our families, careers, hobbies, and causes we believe in—our financial investments are what make those possible. Saving money, and investing it wisely, helps us achieve financial independence, provides a safety net for emergencies, and enables us to reach major life goals like buying a home, traveling, or retiring. However, it’s easy to overlook one of the most powerful tools for building wealth: maximizing tax savings to boost our financial investments. When tax strategy is aligned with investment planning, the result isn’t just lower tax bills but stronger, more sustainable long-term growth.
However, as the saying goes, “You don’t know what you don’t know,” and many individuals and small business owners end up paying more taxes than necessary because they don’t understand how tax planning can work in tandem with their investments, or that taxes can even erode investment returns if not managed proactively.
Planning Ahead Matters
Hiring a professional CPA who’s also a financial advisor can make a huge impact, because tax planning must be proactive instead of reactive. That’s why Henry Harris—a Certified Public Accountant (CPA), Financial Advisor, and partner at Altland & Harris Financial Group, Inc. for the past 17 years—recommends meeting with a professional quarterly. “I have a lot of knowledge about strategies to mitigate my clients’ tax exposure, but I can only apply it if I see them more often than once a year in April,” he says. “More frequent consultations reduce anxiety and can draw attention to things that might need to be addressed from an operational basis to achieve a better result.”
For example, if a client has cashed in on capitals gains, with advance planning, Harris can look for areas of loss to offset the tax implications. Similarly, if a client is selling real estate, would a 1031 exchange—which allows real estate investors to sell a property, reinvest the proceeds in a new “like-kind” property, and defer paying capital gains taxes—be a good idea? Or perhaps a small business’s current entity structure needs to be reevaluated to ensure it’s the most beneficial for tax purposes. Additionally, “there are no surprises about tax outcomes,” Harris says.
Tax Planning versus Financial Planning
According to Harris, tax planning and financial planning are complementary and work in
tandem, so being both a certified public accountant and a financial advisor allows him to have a greater impact when helping his clients. “A CPA alone can’t make certain investment recommendations, and a financial advisor alone can’t make certain tax recommendations, so getting licenses in both areas gives me more freedom to advise clients. Now I can say ‘Here’s what you should do, and I can do it,’” he says.
Above and beyond simple tax return preparation, a CPA and financial advisor like Harris can help clients:
- avoid missed deductions, inefficient investment placement, or tax-inefficient strategies;
- review a clients’ accounting books and tax returns to identify misclassifications and missed opportunities for tax savings;
- set up retirement plans for small businesses and provide options for them to contribute to a retirement plan and reduce their taxable income;
- make suggestions for the best and most beneficial entity structure for tax purposes;
- social security planning; and
- much more.
“Little things can make a big difference,” Harris says. He adds that Altland & Harris now offers quarterly seminars on social security planning for retirement with representatives from Medicare and Social Security to better serve their clients.
Tax Time Tips
As tax season rolls around, Harris offers the following tips and tricks for those looking to maximize their tax savings:
- Meet with your CPA/financial advisor quarterly to ensure you haven’t missed tax savings and address potential tax liabilities early.
- Small business owners should make sure their books are up-to-date and include all business assets. For example, if the business records a $5,000 down payment on an $80,000 work vehicle, the accounting should also reflect the vehicle as a business asset.
- If anything in your life has changed—you’ve bought or sold a property, received an inheritance, etc.—tell your CPA/financial advisor.
- Consider integrating business planning with retirement planning to take full advantage of free money and/or tax strategies.
For more information, email marion.harris@altlandharris.com, call (972) 731-5050, or visit 5600 Tennyson Pkwy Ste 115, Plano, TX 75024.
All Securities Through Money Concepts Capital Corp., Member FINRA/SIPC Investments are not FDIC or NCUA Insured Disclosure May Lose Value – No Bank or Credit Union Guarantee. Money Concepts Advisory Service is a Registered Investment Advisor with the SEC All Non Securities and Non Advisory Products Through Money Concepts International, Inc. Altland and Harris Financial Group, Inc. is an independent firm not affiliated with Money Concepts Capital Corp.